Indonesia’s energy transition hinges on bankable projects and a functioning carbon market, experts say

Experts say Indonesia’s renewable energy and carbon markets need clear, stable regulations to attract investment. (Photo: iStock)

Indonesia is attracting growing interest from renewable energy investors and carbon market participants, but capital is still struggling to reach projects at scale.

Speaking at the July 28 forum “Financing Indonesia’s Energy Transition,” hosted by the Institute for Energy Economics and Financial Analysis (IEEFA), industry experts pointed to a common problem across the renewable energy and carbon market sectors. Indonesia does not primarily lack investors, financing instruments or technical standards. Instead, it lacks the policy and market conditions needed to turn clean energy projects and carbon credits into investable assets.

For renewable energy, the main barriers include grid constraints, permitting delays, land acquisition risks and power purchase agreements that remain difficult to finance. In the carbon market, the challenge is less about trading infrastructure than creating sustained demand.

Blended finance and international compliance markets could help bridge these gaps. However, speakers said both still depend on clear and stable regulations.

Unlock the full article to explore three key takeaways:

1. Indonesia has ample capital, but grid, permitting, land and PPA risks keep many renewable projects from becoming bankable.

2. Blended finance can reduce early-stage risks, but it cannot replace clear and stable regulation.

3. Carbon market growth will depend on compliance-driven demand, stronger governance and higher-integrity credits.